He felt the same as me and Talga jumped straight into our eyes. But what I've only just realised is who discovered Talga there. Can you still remember?
"Talga Resources: Vertically Integrated And Extremely Undervalued
Oct. 16, 2020 4:34 AM ET Talga Group Ltd (TLGRF)
Dmitry Kovalchuk
Summary
- Talga Resources – a vertically integrated technology company – is currently valued as a penny stock miner.
- The company is in a unique position to profit from multiple technological, geopolitical, and environmental trends.
- With numerous short-term catalysts, the company presents a unique buying opportunity for investors who are looking for an undervalued battery technology company.
Introduction
What are the biggest challenges of flying personal transportation? Most likely battery capacity and the weight of the materials used. The combination of durable light-weight materials and high capacity electric batteries will lead to the adoption of flying personal vehicles one day.
While it still sounds like a distant future, there is a company whose technologies are addressing both issues today. Surprisingly, it is not a privately-held startup researching some nanoparticles in a lab.
This is a listed company with technology whose products are progressing through confidential qualification processes with 35 active Li-ion battery manufacturers including six major global automotive original equipment manufacturers (
Talga Looks to Expand Battery Anode Capacity).
Enter Talga Resources (
OTCPK:TLGRF), a vertically integrated advanced materials company focusing on battery anode and graphene additive products from Australia.
The current environment
The current investors’ attitude towards technology companies promising us a greener future by liberating us from the dominance of the combustion engine can be best described by this meme:
View attachment 59002
Talga is a startup which claims that it can increase battery density by 20% and is valued above USD 1 Billion in the latest financing round (
Sila Nano’s battery tech is now worth over $1 billion). Even Nikola (
NKLA), a publicly-traded company with a questionable reputation whose claims have been challenged and/or proven false is still valued at around USD 9 Billion (per October 9, 2020).
One would expect Talga Resources to be extremely overvalued by now. Luckily, it is not. Talga’s market capitalization is only around USD 150 Million (per October 9, 2020).
In my opinion, there might be several reasons why the company has been under the radar and was not noticed by the general investing public yet:
- As a former gold explorer (founded in 2010 as Talga Gold), Talga is viewed by the general investment public as just another penny stock Australian miner.
- The company is based far away from Silicon Valley and is not listed on the US Stock Exchange. However, the shares can still be acquired in the US OTC.
- Battery materials like Lithium, Nickel, and Cobalt get more media attention than Graphite.
Talga Resources overview
Talga is a vertically-integrated advanced materials company, whose business activity lies in three interrelated fields
View attachment 59003
(Author’s representation)
Graphite mine
Talga is developing a graphite mine in Sweden, with a trial 25,000-tonne mine already approved. The full-scale production is planned for 2023. According to the Pre-feasibility Study (PFS) conducted in 2019, Talga’s mine exhibits pre-tax annual revenue of USD 188 million and IRR of 55%. The estimated Net Present Value (NPV) of the project over 22 years is USD 1.056 billion, calculated with a discount rate of 8 percent (
Outstanding PFS results support Vittangi graphite development). The mine is likely to be expanded greatly with the Niska Expansion Project. The scoping study for the project is underway and its results will be published in November 2020.
View attachment 59004
(
Company Presentation CSIROE October 2020, Page 20)
Anode Products
Talga not only mines graphite, but it also develops graphite anodes that are used in battery manufacturing. I consider this illustration from
The future of Energy Storage: Cobalt and Lithium Markets Strategic View to be extremely helpful to visualize the role of graphite anode in battery manufacturing.
View attachment 59005
The company is currently developing a whole pipeline of anode products:
- Talnode-C: Engineered graphite for fast charge, high power, high capacity, and low-temperature performance
- Talnode-Si: Silicon-graphene composite anode for higher energy density
- Talnode-X: Graphite-based anode with ultra-fast charge capability
- Talnode-E: Graphite-composite anode materials for Solid-State Batteries
(
Investor Presentation August 2020, page 10)
Talnode-C and Talnode-Si are currently undergoing customer qualification with numerous parties. Unfortunately, these engagements are under active non-disclosure agreements. It is important to realize that unlike lithium, Nickel or Cobalt Anode Materials require customer testing in batteries at increasing volumes to enter long-term contracts.
Graphene
Graphene was the original reason for me to invest in Talga resources back in 2018. Graphene is a two-dimensional atomic-scale material, that is made of a single layer of carbon atoms. Andre Geim and Kostya Novoselov were awarded the 2010 Nobel Prize in Physics "for groundbreaking experiments regarding the two-dimensional material graphene."
The material possesses different unique characteristics.
View attachment 59006
(
The Science Thinkers)
It can be combined with other materials to enhance their properties. Since graphene was discovered, scientists around the world researched different graphene applications. There are so many potential application fields that even Wikipedia has a standalone article on
the potential application of graphene. However, since its discovery, most of the unique graphene characteristics remain in the lab. The two biggest challenges of graphene are scalability and price. Most important however is that its unique properties were observed in labs, and most of them cannot be transferred into the real-life application just yet.
Talga Resources develops graphene-based products in four different sectors.
View attachment 59007
(
Graphene Week 2018 Company Presentation, Page 8)
The ones that can be meaningfully scaled mid-term are coating and battery storage.
Coating application
In December 2019, the company announced the commencement of a new large-scale trial of its coating product Talcoat, a graphene additive for maritime coating. The product is an on-site dispersible powder that can add graphene’s properties into paint and coatings. The evaluation period was set for 12-18 months, meaning that the results can become available anywhere between January and July 2021 (
New Graphene Coating Large Scale Trial).
Battery storage
While I was writing this article, Talga announced its decision to fast-track its Mass-Producible Silicon Anode Product - Talnode-Si - Silicon-graphene composite anode for higher energy density. This is a result of the high sample demand for this product from its customers:
Moreover, the company is focusing on Talnode®-Si preliminary feasibility studies that they plan to finalize in Q1 2021. The goal is to evaluate stand-alone commercial production in Europe (
Talga Fast Tracks Mass Producible Silicone Anode Product).
Talnode-Si aims to address the two most important characteristics of the current battery technology – to increase the capacity and to reduce its loss after charging cycles.
View attachment 59008
(
Company Presentation CSIROE October 2020, Page 16)
Why it is the right time to invest in Talga Resources
Talga is a vertically-integrated technology company that possesses both the natural resources and the technology to develop products that are likely to be in high demand from EV and battery manufacturers around the world. The company was not affected by the current “EV-Hype” and is still valued as a pure natural resources miner whose mine is still 2 years away.
Additionally, Talga has a naturally competitive advantage in different areas.
Resource Grade
Talga’s mine is estimated to have the highest grade of graphitic carbon among its competitors.
View attachment 59009
Investor Presentation November 2019
Costs
Talga’s mine and anode production facility is located in Sweden, a country with almost half of the electricity production which is covered by hydroelectric power stations. Low energy costs in combination with a high amount of graphite in the ore give Talga an advantage in ore processing and anode production. This makes the company a cost leader in coated anode production.
View attachment 59010
(
Talga Anode Project pages 13 and 17)
Geopolitical considerations
Sweden is a developed country in terms of physical and digital infrastructure and gives Talga Resources easy access to the European battery market. Taking into consideration the recent development in the global trade and pandemics impact, secure supply chains among friendly and stable countries, which share the same values, are likely to be even more important in the future.
ESG
Mining is a dirty and energy-consuming business. Talga, on the other hand, is a low-emission leader. The company mines natural graphite, using 100% sustainable electricity and locally-produced materials. This is how Talga achieves both extremely low production costs and C02 emissions.
View attachment 59011
(
Company Presentation CSIROE October 2020, Pages 6 and 18)
Investor-friendly management
Mark Thompson is an extremely investor-friendly CEO. He holds regular webinars where he answers investor questions. He takes his time to explain his ideas and vision and does not dodge hard questions.
The company has raised additional equity in the past and have done it in an investor-friendly manner. In August 2020, Talga Resources raised AUD 10 Million in institutional placement. The previous offering was done among existing shareholders in November 2019, where the company raised AUD 6,2 Million in an oversubscribed offering.
In one of the webinars, I asked Mark why he did not try to raise more money to have enough cash buffer in case of an emergency. He explained that he wanted to avoid a stronger dilution and is aiming to finance the mine and other projects in a non-dilutive way, which he was very confident about. For example, through partnerships for project finance.
Near-Term catalysts
Numerous near-term catalysts can catapult Talga into a different league, which is likely to positively affect its valuation and create a positive feedback loop for the stock price going forward:
- Niska Scoping Study to evaluate the significant capacity expansion of the planned Anode Project in November 2020.
- Recently, Talga has signed a non-binding Memorandum of Understanding to evaluate the joint development of Talga’s Anode Project with Mitsui Group. I expect this MoU to develop in a development agreement in the coming months, maybe shortly after the results of the scoping study.
- Additionally, the trial qualification programs that have been underway for a long time might result in contract wins for Talga that might be announced shortly.
- Talnode®-Si preliminary feasibility study to be finalized in Q1 2021.
- There should be results of the large-scale trial for Talga coating graphene product - Talcoat - mid 2021 at the latest, which might lead to revenue-generating contracts for the company.
- Finally, even though there are no definite plans about it now, I count on a possible listing in the US in 2021."
Stock market enthusiast. I am interested in biotech, mining, natural resources and technology and have been active on the stock market since 2007. I am based in Europe which is why I often write about foreign companies. Feel free to follow me on twitter if you enjoy my articles.All opinions are my personal ones and are not an investment advice.